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Issue Number One
High Gas Prices Affect More Than What You Drive; Interview with Congressman Randy Forbes; How Will the Next President Bring Oil Prices Down?
Aired July 04, 2008 - 12:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
GERRI WILLIS, CO-HOST: The second half of 2008 is under way. Will the economy see a rebound? And will your 401(k) ever bounce back? Will the U.S. auto industry get back on its feet?
We'll try to answer those questions, plus we'll tell you about some big cuts in Medicare scheduled to take place today.
And we'll show you how to score the big tickets to all those sold-out events this summer.
Issue #1 is your economy. ISSUE #1 starts right now.
Hello and welcome to the special edition of ISSUE #1. I'm Gerri Willis.
Everywhere you go, people are talking about high gas prices. Those $4.50 a gallon signs I see in New York City, they don't seem real. But guess what? They are.
But you can save money on gas prices. We're going to show you how. And we're going to look ahead at some solutions at the future of your energy, plus break down the presidential candidates' plan.
From the ISSUE #1 headquarters to the CNNMoney.com newsroom, we are all over the stories that matter to you.
And Ali, of course the big story of the day has got to be oil.
ALI VELSHI, CO-HOST: Got to be oil. And people trying to figure out what is driving the price of oil to those record prices. What's driving the price of gas? It's not just pinching household budgets across the country, it's changing the way Americans live.
(BEGIN VIDEOTAPE)
VELSHI (voice-over): About three-quarters of the price of a gallon of gas is determined by the price of oil, which according to at least one economist is headed higher.
JEFF RUBIN, CHIEF ECONOMIST, CIBC MARKETS: We have a forecast of about $225 a barrel, which would translate roughly into around $7 a gallon gasoline.
VELSHI: In a recent CNN/Opinion Research Corporation Poll, 78 percent of Americans expect gas to hit five bucks this year, and that's forcing some changes. Ford says truck and SUV sales have stalled. It's cutting production and staff to make fewer trucks and more fuel-efficient cars.
General Motors might shift workers from truck factories to car plants. Chrysler is guaranteeing gas at $2.99 if you buy certain models. And Honda is revving up production of its popular Civic to meet increase demand.
Rubin says high gas prices affect more than just what people drive.
RUBIN: For example, where people live. Because people aren't going to be able to commute 50 miles to work every day, because the cost of filling your tank is going to make that prohibitively expensive. So property values in the suburbs will start to fall. Property values in the cities will start to rise.
VELSHI: Author and economist Stephen Leeb says this puts suburbanites in a position to lead the change.
STEPHEN LEEB, AUTHOR, THE OIL AUTHOR: There's no doubt that people living in suburbia are suffering more. But maybe those are the people that will say, we've got to do something about this. The auto companies have to retool. They have to supply us with plug-in hybrids and things like this. I mean, we can do this, that's the whole point.
VELSHI: Leeb says attitudes are already shifting but only because oil prices are so high.
LEEB: But I feel the first correction in oil down to $100, $110, people will say -- oh, gasoline came down to $3.80. We don't have to worry anymore. Well, you really do. And this is a long-term problem that absolutely will threaten our way of life.
(END VIDEOTAPE)
VELSHI: All right. To understand how to avoid this threatening our way of life, we have to understand how we got to this point. Who is to blame, and what if anything, will bring oil prices down and get consumers some relief at the pump right now?
It's a lot of questions. Let's get down to it.
Stephen Schork is the publisher of "The Schork Report." Peter Beutel is the president of Cameron Hanover. These are two oil experts who deal with this every day.
Stephen, let's start with you.
We are heading, heading very quickly toward that $150 a barrel level. We've never seen this before. If you believe that this is supply and demand, why all of a sudden have we seen this? What's happened to world demand that has done this? Or is it speculation?
STEVEN SCHORK, PUBLISHER, "THE SCHORK REPORT": Well, it's both and both. We have to remember the reason why the speculators are in this space to begin with is because we've come off about 30 years of neglect to the supply side. Whereas demand has continued to grow since the 1970s, our ability to supply that demand has not kept pace.
Therefore, the speculator has realized this and the speculator is now in this space to take advantage of this. This is what has driven oil prices back from $20 in 2001 up to $80 in the fourth quarter in 2007. Now, what's driving oil prices up close to $140, and apparently on their way to $150...
VELSHI: So you're saying that this increase in demand has actually fueled the speculation, it's caused momentum in the oil market?
SCHORK: Oh, absolutely. Speculators would not be in this position if the market was not so fundamentally misaligned. And that is the point.
We do have approximately 86 to 87 million barrels a day of oil demand in the world. Excuse me, oil supply capacity in the world. We have 85 million barrels a day of demand.
Therefore, when you do get a disruption in the supply chain, be it weather-related, as we found out with Katrina and Rita, or be it manmade, as we saw in the 2002 Venezuelan general strike, that has a very quick affect on supply.
VELSHI: A big impact.
SCHORK: And that immediately drives prices up. The speculator realizes that and they're taking advantage of that situation.
VELSHI: Peter Beutel, U.S. demand has not increased substantially in the last few years. At all, in fact. This is world demand.
Now, let's say a few weeks ago we had the administration announce they're going to stop filling the Strategic Petroleum Reserve. Then we had Saudi Arabia announce an increase, a total of 700,000 barrels of oil that they're going to keep putting on the market. Over the last couple of months they've announced that they're going to start doing that.
No affect on the price of oil whatsoever. Why not and what's it going to take?
PETER BEUTEL, PRESIDENT, CAMERON HANOVER: Well, we really -- all of the problems that Stephen is talking about are true. And in addition to that, we have another market overlaid over this market. And that's currencies.
A lot of the movement that we've seen higher, really from about $75 or $80, has been based on Bernanke and now Jean-Claude Trichet, the head of Europe's Central Bank, tipping their hand and letting people know that they were going to take steps that were going to hurt the U.S. dollar. We have most of the speculators that are in this -- and there are a lot who are in this buying because of supply and demand -- but a larger number of people that are in this are investors, and they have been buying because central bankers have been hurting the dollar. If we can get the dollar turned around, we're going to see our first wave of serious...
VELSHI: Yes, I might grow hair before that happens.
Stephen, let's talk about offshore drilling that John McCain has suggested and that President Bush has suggested, and developing the oil shale in the Green River Basin in the western United States for oil. None of this is going to happen in the next few years, even if they lifted the ban on offshore drilling and we started going toward that shale for oil.
SCHORK: No, it's not. But again, this should have been some of the things we have should have been addressing in the 1970s and the 1980s and the 1990s, and we haven't. And all of a sudden, now we get to the point where, wow, oil's now at $150 a barrel.
Well, why do anything about supply now? Because it's going to be 10 years. Well, you know what? If we did this 10 years ago, if we went into ANWR 10 years ago when we had the opportunity, you know what? ANWR is the equivalent of 30 years of imports from Venezuela.
Have you looked at the relationship between Caracas and Washington lately? It's not very positive.
VELSHI: So sounds to me like you think for oil prices and gas prices in the long term, John McCain might be the better solution.
What do you think about that, Peter?
BEUTEL: Well, I agree completely that we have to go ahead and start looking at the long term. But I'm not going to throw all my eggs behind -- in one basket or one party.
We have to do everything the Republicans want and everything the Democrats want in order for us to get through this. We have to cut demand, we have to increase the number of miles that cars get, we have to spend money on alternative energy. And we have to open up everything that President Bush wants to open up.
So it's not a matter of either or, or who's better. We've got to do it all.
VELSHI: All right. Peter Beutel, president of Cameron Hanover. Steven Schork, publisher of "The Schork Report."
Thanks to both of you gentlemen.
SCHORK: Thank you.
BEUTEL: Thank you.
WILLIS: Tough situations often require creative solutions. And one congressman thinks he has the answers to your energy problems. We'll check that out. And McCain versus Obama. We'll break down the candidates' issues. That's coming up next.
We're all over issue #1, the economy, right here on CNN.
Stay with us.
(COMMERCIAL BREAK)
(BEGIN VIDEOTAPE)
VELSHI: Well, there are a lot of plans out there to fix our energy problem. One of the most far-reaching that I've seen comes from Representative Randy Forbes of Virginia. He's calling for what he calls a new Manhattan Project. It would make the U.S. energy- independent in 20 years.
Representative Forbes joins me now from Washington.
Thanks for being with us. Tell us about this plan. You're calling it the new Manhattan Project. What's the implication? What does that actually mean?
REP. J. RANDY FORBES (R) VIRGINIA: Well, Ali, as you know back in World War II, when we had a major struggle on how we were going to defend freedom and create the atom bomb, everybody said it couldn't happen. We brought the best and the brightest minds together and it did happen, and we did the impossible.
In 1960, when President Kennedy talked about putting somebody on the moon, everybody laughed, thought it was absurd. We brought the best talent we had across the country and we were able to put somebody on the moon within a decade.
We believe right now that the average American person thinks this oil crisis belongs either to the oil companies, the politicians or foreign dictators. The new Manhattan Project just begins to come back and says we're going to bring the best, brightest minds of the country and we're going to reach that goal instead of just talking about it.
VELSHI: All right. We applaud you for the leadership. It's going to take money, and we'll get to that in a second.
But tell me in very brief terms, what it is you think we can do? You talk about achieving energy independence within 20 years, meaning 100 percent of our power, whatever way we generate it, will be generated in America.
FORBES: First, Ali, we do three things. The first thing we do is establish a commission of the best and brightest scientists and engineers we have in the country, and we task them with the challenge of coming back to us in a year with a plan that's going to get us 50 percent more energy independent in 10 years and 100 percent in 20 years.
Secondly, we set a whole host of prizes to the American private sector and say if you can reach one of these goals for us, we're going to pay you a substantial sum of money. And it's been proven over and over again if we do that, American businesses and individuals will spend 40 and 50 times that to try to reach and attain those goals.
And the final thing we do is actually put dollars towards research and capabilities around the country to hopefully inspire a whole new generation of young people in math and science and engineering so that they can help us attain this challenge.
VELSHI: Congressman, let me tell our viewers very briefly, you are talking about doubling fuel efficiency standards to 70 miles per gallon. We're not even at 30 right now -- cutting home and business energy use in half, making solar power work at the same cost as coal, making biofuel production the same price, cost competitive with gas, neutralize nuclear waste and containing the emissions from coal using more nuclear fission. What kind of response have you had to this?
FORBES: Well, one of the things that we see from the American people is that whenever we give them big standards and big goals, they reach out and grab them. I think one of the problems we've had so far is we've been tackling this one too small a scale.
We've been in the weeds instead of going up and giving a great life size challenge that people can reach. I think when we do it, the American people will rise to the challenge and I think we'll meet this challenge like we did with the Apollo situation and like we did with the first Manhattan Project.
VELSHI: Have you talked to the presidential candidates about this?
FORBES: The presidential candidates have been going around talking about it a lot. We've had other people talking and we just felt it was time that we stopped talking and actually put a bill forward and began moving the dialogue and the debate. That's why we drafted this and put it forward.
VELSHI: Last question for you, how do we pay for this?
FORBES: Well, I think one of the things that we'll see is look what we're paying for it now with the pump. And you know, if we can reach just one of these seven goals, it will more than quadruple any dollars that we put in there. So while this bill is an expensive bill, about $24 billion, it's the same amount that we put to the original Manhattan project in real terms today. I think the dollar savings will be enormous for us in future energy independence.
VELSHI: Congressman, we appreciate the far-reaching plan that you put forward and we will watch it very closely, along with you.
Congressman Randy Forbes...
FORBES: Thank you, Ali.
VELSHI: ... Republican of Virginia.
(END VIDEOTAPE)
WILLIS: Record-high gas prices, tight oil supplies, global warming, all Americans are concerned about energy right now. And whoever wins the White House in the fall will spend a great deal of his time dealing with these challenges.
Let's break down both candidates' plans for you right now.
Steve Hargreaves of CNNMoney.com is joining us now.
All right. So this next president, this is going to have to be job number one. Let's break down each of the candidates.
Let's start with offshore drilling. What does McCain like? What does Obama like?
STEVE HARGREAVES, WRITER, CNNMONEY.COM: Well, McCain wants to lift the ban on drilling off the East and West Coast. Obama wants to keep it. Neither candidate supports opening up the Alaska Arctic National Wildlife Refuge.
WILLIS: So big choices there if you have a personal point of view on offshore oil drilling. You've obviously got a choice there.
Cap and trade is something that people talk about all the time. And it's a pretty complicated thing. But if you're interested in reducing greenhouse gas emissions across the planet, this is one way to do it.
Start by defining it and then tell us where the candidates stand.
HARGREAVES: Well, I just said, it's a way to reduce greenhouse gas emissions. And how it works is the government issues permits to pollute. And then the number of permits that are out there each year declines.
Companies can then trade those permits among themselves or they can pay to get cleaner technology. The idea being that as fewer permits are out there, they become more expensive, and sooner or later it becomes, you know, a better financial decision to get the new technology, as opposed to buy the permits.
WILLIS: All right. So you're really talking about an oil marketplace there that is different from what we have right now.
Let's talk about alternative fuel technologies like hydrogen fuel cells. Tell me, what are the candidates thinking about that? Starting with Senator John McCain.
HARGREAVES: Well, McCain really wants to rely much more on the free market approach. He supports this cap and trade program, and then he feels that the market will take over and spur innovation on its own.
Now, this is a key difference between the two candidates' energy policies. Obama wants to charge companies to pollute. Charge companies to buy those permits right away. And he's going to use that money to embark on a massive federal program to invest in renewable energies to the tune of something like $150 billion over 10 years.
WILLIS: OK. Big differences there yet again.
All right. Let's talk about biofuels like ethanol. Are there big differences between the candidates there?
HARGREAVES: Well, they both support expanded use of biofuels. They both feel that there will be more advanced biofuels coming on the market over the next two years. It will take the pressure off food prices.
The biggest difference probably is the ethanol tariff. McCain wants to get rid of a tariff on imported ethanol and Obama wants to keep it in an effort to protect the domestic industry.
WILLIS: You know, there's been a lot of talk about windfall profits in the oil industry. Those companies have made so much money. Where do the candidates stand on that issue?
HARGREAVES: Obama supports a windfall profits tax on the oil companies and he wants to use the money to give to low-income people to offset the price of gasoline. McCain does not favor a windfall profits tax.
WILLIS: All right. Well, big differences there.
Steve Hargreaves, thank you so much for breaking it down for us. We appreciate it.
HARGREAVES: You're welcome.
WILLIS: Roland Martin is getting in on the action right now. What he has to say about the presidential candidates' plans and if they'll work.
And looking in the past to fuel the future. Could coal be the answer to our energy problem?
You're watching ISSUE #1. Stay with us.
(COMMERCIAL BREAK)
GREGORY: It was bound to happen. With gas and food prices burning a hole in your budget, now just flipping on a light switch can cost you more.
Utility companies across the nation are seeking rate hikes, some as high as 29 percent. They say the extra money is needed to offset soaring fuel costs for coal, natural gas that is used by many utility companies. It's also expected to foot the bill for building new power plants and upgrading the aging power grid.
VELSHI: Well, earlier in the show we talked about how we got ourselves into this energy mess, but how do we get out of it? More specifically, how do the presidential candidates intend to bring prices down?
CNN Political Analyst Roland Martin joins us now from Chicago.
Roland, good to see you.
The question is here is, we got ourselves into this mess. Can these presidential candidates who know that this is issue #1, who know that energy prices are the biggest deal on the minds of Americans right now, can they even have much of an impact on the effect of the price of oil and gas?
ROLAND MARTIN, CNN CONTRIBUTOR: No. So we're done now.
No. No, Ali, I mean, here's the deal. I think we have to acknowledge that the war in Iraq is playing a critical role as it relates to energy prices.
So I do believe what happens with our foreign policy in that particular area could have an impact. But look, this is a long-term issue we have to deal with.
I mean, Ali, look. Look in America right now. We have to simplify this.
We have an obesity problem. People didn't get fat overnight. It was supersize meals, you're eating, you can't push your weight. So you're not going to lose 40 pounds overnight.
The same thing with our energy policy. It's going to have to be long term.
This is forcing us now to confront public transportation. We're going to be looking now at high speed rail. All of the things, Ali, that we have pushed back...
VELSHI: But will we? That's the thing.
MARTIN: ... all of these years are now at the forefront. We have no choice, because here's the deal -- we are a reactionary country. We only step up, frankly, when something catastrophic happens and we're forced to do it. But the same thing in our personal lives.
We don't really start tightening our belts economically at home until we really have to. We've got extra cash to throw away, we do it.
So, yes, we are going to have to do it. You are going to see Congress step up saying, wait a minute, we've got to address public transportation. Because the public is going to start demanding it because they're going to be driving fewer and fewer cars. There's no doubt it's going to happen -- Ali.
VELSHI: And in New York here, or in Chicago where you are, it's probably easier to ramp up that public transportation because the infrastructure's there and it's in the psyche. But there's so many parts of this country where people drive so many miles from home to work, and they're going to get very hard hit, because most expectations are that the price of gas isn't going down any time soon. Our own polls show that people think it'll hit $5 before it goes down.
MARTIN: Ali, it's not -- again, I want people at home to listen to what I'm saying. Use obesity as the example. And that is, we have been getting over all of these years, Ali. We've been paying cheap oil.
You know, so all of a sudden now, we are coming in line with the rest of the world. But not only that, when you deal with demand, we have been the chief demand folks.
Now with India and China, you've got two other players. So even if our demand decreases, their demand increases.
VELSHI: Yes.
MARTIN: Oil still stays high. So we're going to have to change the way we do business.
VELSHI: Should we then be looking to the presidential candidates or the Congress to do this? Or are you saying we trade in the SUVs now and we make changes to own lives, and we put solar power in and we do those kinds of things?
MARTIN: It's a combination of both. We cannot look to the presidential candidates -- I don't care if it's John McCain or Barack Obama -- to solve every problem, or Congress. This is a mutual situation. And that is, we have to make our own changes.
We have to look at our consumption of oil, but also, they must look at the high taxes on oil, they must look at it in terms of those gas prices. But they also must look at, how do we begin to fund public transportation? How do we begin to fund alternate sources?
Ali, the answer is not let's drill more. That keeps (ph) demand where it is or increases. The answer is, how do we change the way we do business?
And so the same thing. You want to lose weight? You better watch your portions, you better start working out.
We better start working out when it comes to energy, otherwise we're going to have the same problem over and over and over again, and it's going to cause us major problems down the road. Deal with it now, confront it now.
VELSHI: From your lips to their ears.
Roland Martin, our political analyst. Thank you for being with us, Roland.
WILLIS: A good metaphor there.
MARTIN: Thanks, Ali. WILLIS: All right. Coming up, what is Congress doing to get you relief at the pump? Are they doing anything? And will it make a difference to you?
We'll take a look.
Then, getting 50 miles per gallon, it may sound too good to be true, but it is possible. It's called hypermiling. We'll explain next.
You're watching the home of ISSUE #1: THE ECONOMY, CNN.
(COMMERCIAL BREAK)
(NEWSBREAK)
(WEATHER REPORT)
DON LEMON, CNN ANCHOR: I'm back in the "NEWSROOM" at the top of the hour where we'll have the first English interview with former hostage Ingrid Betancourt. And we're live in New Orleans for Essence Fest (ph).
Now let's throw it back to New York and Gerri Willis.
WILLIS: With gas prices sky high, many folks are searching for an energy fix. Some are climbing aboard new bills in Congress that could include dramatically more funding for Amtrak. CNNMoney.com's Poppy Harlow. She's here with our "Energy Fix."
Hi, Poppy.
POPPY HARLOW, CNNMONEY.COM: Hey there, Gerri.
Well, you know what, folks, there is some compelling reasons out there for people to want more rail travel in this country. In fact, a record number of people are traveling on Amtrak. We've seen a record high last month in terms of travelers as gas prices hit record highs and air travel becomes more expensive and even more of a hassle. Nearly 26 million people rode the rails in the U.S. last year.
Recently I spoke with New Jersey Senator Frank Lautenberg. He's sponsoring the Senate version of a bill that is moving through Congress right now calling for more than $11 billion in funding for Amtrak over the next few years. He says rail travel is a good energy fix.
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SEN. FRANK LAUTENBERG, (D) NEW JERSEY: If we can make the system more efficient, make it better used, I think that it's fair to say that prices should come down. And that's something we're going to watch very carefully. We can't push people into a system that's going to cost them a lot more money to travel. But on balance, I must say -- tell you this, it typically costs less than a reserved air flight. It costs less than a single person or two traveling in a car. (END VIDEO CLIP)
HARLOW: Now Lautenberg says it's a greener option according to the Energy Department. Amtrak uses 17 percent less energy than domestic airline travel when we're talking about a per passenger per mile basis. And you know what, Gerri, Amtrak uses 21 percent less energy than just driving down the highway.
WILLIS: Well, that's good news. But I know a lot of folks out there, they know that most of Amtrak's business is in that Northeast corridor from say Boston to Washington. How does that play with the rest of the country if they're paying for service just in the Northeast?
HARLOW: That's exactly right. Where I'm from in Minnesota, almost nobody uses Amtrak. A lot of people just rely on their cars. Not like we do here in New York. A lot of people take public transportation. A lot of people take Amtrak here in the Northeast. But Lautenberg thinks he can turn that around by investing a lot more money in the rails so it becomes a lot more like what we see in Europe. A lot of Europeans take the train. Take a look.
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LAUTENBERG: People are begging to get an alternative to being in the car, stuck in the car or delayed flights. So I think that we ought to try to replicate what we see in Europe. I don't know that we can come that close. But they spent billions and billions more each and every year. We've been parsimonious in the way we treat rail, but we've spent plenty of money on aviation and highways.
(END VIDEO CLIP)
HARLOW: Now the House version of that bill passed with an overwhelming majority, but President Bush is threatening a veto. He calling for more domestic oil drilling. He feels the funding for this bill is way too high and the House and Senate versions of the bill both had enough votes to override a veto. But, of course, Gerri, they call for different amounts of funding. And you know what that means in Washington, they'll have to reach some sort of compromise.
WILLIS: A compromise?
HARLOW: It's not easy to do.
WILLIS: Exactly. And lots and lots of bucks. Interesting report, Poppy. Thank you for that.
HARLOW: Sure.
VELSHI: Well, no matter what Congress does, our next guest says oil prices are likely to stay high. Stephen Leeb is the president of Leeb Capital Management. A regular guest on our show. An expert on oil. An author of a book on oil where you predicted these sort of things would happen.
Stephen, you are very, very concerned about the affect of these high prices.
STEPHEN LEEB, PRESIDENT, LEEB CAPITAL MANAGEMENT: I'm extremely concerned because I think the effects of these high prices are not going to go away, Ali. They're probably going to get worse. And it's going to make this economy very, very difficult to manage for anybody.
And there are no quick fixes. I think America's accustomed to believing in quick fixes. Not this time. This really has to be treated almost like a war. Or maybe just like a war. No blood has to be shed. But we really need a Manhattan project to sport out the research and then we need a couple of trillion dollars to put up the infrastructure.
And it's going to be a very, very difficult job ahead. And the biggest problem right now, Ali, is we don't recognize what we're getting into. We really don't. But it's here, it's now, and the sooner we take steps, the better the chances of solving it.
VELSHI: What do the candidates have to do, the presidential candidates have to do, that's different? They have stated that they would like to reduce our dependence on imported oil. They've stated certain goals to get there. John McCain is talking about a little bit of relief from that gas tax holiday of 18 cents a gallon, which makes a lot less sense then it did when he first introduced it because it's such a small proportion. But what can they say that would stimulate the kind of research and development of alternatives that you're talking about?
LEEB: What they have to say is -- and it would be great to one day wake up, turn on the TV and see President McCain or Obama, along with the president of France and seven or 10 other presidents, including China, saying, we have embarked on a massive project to free the world as much as possible of fossil fuels. That's what we need to do.
This has to be treated like a war because basically we're running out of the stuff. And it's not just oil. See, people view oil in isolation, Ali. But we need oil to build alternative energies. And the more we use the stuff, the harder it is going to be to put up alternative energies.
Just one quick example, for instance. One of the most effective alternative energies right now is wind. We have about eight times as much wind on this earth as we need to supply all the earth with energy. But you know what? The cost of wind, despite technological improvements, are actually going up. Why? Because steel costs are going up. And as steel costs go up, so does the cost of alternative energies and so does the cost of finding additional oil.
I mean these are the vicious circles that we have to confront. And we're not going to do it by just sitting down and scribbling on the back of an envelope. We need a Manhattan project.
VELSHI: Are there likely alternatives out there that will be the basis from what we can transform into? LEEB: This is what's so frustrating. There are multiple alternatives, from wind, to solar, to tidal, to nuclear that could do it, but we've got to start developing them quick or there won't be the resources to put them in place. We won't have enough steel.
I mean Rio Tinto (ph) just negotiated -- get this -- a 98 percent increase in iron ore prices. That makes wind turbines much, much more expensive. It makes nuclear plan plants more expensive.
VELSHI: Or refineries. And anything that . . .
LEEB: Or refineries. You name it. It makes putting nuclear plants -- I mean water is a big issue. I mean we've seen this with biofuels. Water's also needed to cool nuclear plants.
VELSHI: And we don't even embark on wars until we have to in some cases. This is one of those things, in 30 years we might say, hey, that Leeb guy was right. What is going to stimulate this action to get these presidents of the world together to sit there and solve this problem?
LEEB: You know, Ali, I hate to say it. You know, I think that in June 1941, most thinking Americans realized Hitler was not a friend of ours. He wanted to dominate us, yet it took Pearl Harbor to get us in the second world war. I hope I'm dead wrong, but it may take something like a massive depression or it make take an attack on the Saudi oil fields, or maybe an attack on Iran, which everyone is talking about now. Something that causes oil prices to surge to $200, $250 and puts us on the ropes. Then Americans will roll up their sleeves and we have a pretty good history of winning wars. But we have to realize one is necessary.
VELSHI: When they embark on it, I will be here to remind people that you talked about it a long time ago.
LEEB: Thanks, Ali.
VELSHI: Stephen Leeb, wonderful to talk to you again. Thanks.
WILLIS: Still ahead on ISSUE #1, tapping different reserves to fuel the military.
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ASST. SECY. BILL ANDERSEN, INSTALLATIONS, ENVIRONMENT & LOGISTICS: We are considered, based on the amount of coal that's in the ground, to be the Saudi Arabia of coal.
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WILLIS: Is coal the future of the future for the U.S. Air Force? And could it save you money? Or is hydrogen the answer in the quest to become less energy dependent? We're looking at all the angle and how they impact you. We're watching ISSUE #1.
(COMMERCIAL BREAK) VELSHI: You hear so much about high gas and oil prices these days. We talk about it every day on this program. But the military has a plan to at least try and lower its costs. And that pushes gas aside in favor of coal.
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VELSHI, (voice-over): The United States Air Force uses 2.6 billion gallons of jet fuel a year. That's a gas bill of roughly $10 million a day. According to the Air Force, a 10 percent increase in the price of a barrel of oil costs them, and American taxpayers, $660 million a year. Given those prices and the need to become more energy independent, the Air Force is on a mission.
ANDERSEN: We are testing multiple aircraft within the Air Force aviation inventory on a blended fuel that includes a 50 percent portion of normal jet aviation fuel made from petroleum and a 50 percent blend of synthetic fuel made via the Fischer-Tropsch method.
VELSHI: Fischer-Tropsch is a method of converting natural gas, or coal, into liquid fuel. The process was named after two German scientists who developed it in 1923. Later the Germans used this technology to convert coal to fuel during World War II. South African company Sasol has been turning coal into gasoline using the Fischer- Tropsch's method for decades. They supply Tambo International Air Port in Johannesburg with its synthetic blend for commercial flights.
So far, the U.S. Air Force has certified the B-52 to fly on a synthetic fuel blend made from natural gas. But they say they hope to use coal in the future. Performance wise, they say there's been no downside. In fact, the synthetic fuel burns cleaner.
The United States has the world's largest known coal reserves. More than a quarter of a trillion short tons. That's about 545 trillion pounds.
ANDERSEN: You look at available in the ground resources that this country has. We are considered, based on the amount of coal that's in the ground, to be the Saudi Arabia of coal.
VELSHI: And Montana has the country's largest reserves of coal. The Air Force is prepared to lease out 700 acres of Malmstrom Air Force base to anyone qualified and willing to build and operate a plant to make jet fuel out of coal. The price tag, though, could be $1 billion. Ultimately, the Air Force hopes the coal to fuel model crosses over into the commercial aviation industry.
ANDERSEN: We're working with the commercial aviation industry and we're working with other air forces around the world as we kind of build a consortium to understand how to do this best and also how to do it in the most environmentally friendly way.
VELSHI: And that's the rub. Environmentalists worry that taking this mainstream could have devastating effects on the environment.
ALICE MCKEOWN, SIERRA CLUB: Coal to liquids are bad for the environment from the time the coal is torn from our mountains, to the time it's burned and polluting carbon dioxide in our tail pipes. It's a really dirty process that uses a lot of water, creates a lot of global warming solution and it's not a smart option to move forward.
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VELSHI: And there's also another concern. It's a lesson that we've learned from the use of corn to make ethanol. Increasing the demand for coal could push the price of energy up across the board. Right now coal is used to generate roughly half of all the electricity that's produced in the United States. And, Gerri, coal prices are already double of what they were just a couple of years ago.
WILLIS: No where to turn.
Well, could hydrogen be the answer in the quest to become less energy dependent? Shell recently opened its first hydrogen station in California. That's the second in the nation.
Our Chris Lawrence takes a look at whether or not it could be the way of the future.
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CHRIS LAWRENCE, CNN CORRESPONDENT (voice-over): The bright blue sign sticks out and promises an alternative to buying gas.
DR. GRAEME SWEENEY, SHELL FUTURE FUELS: And it creates that sense that this is an ordinary thing to do.
LAWRENCE: California's first retail hydrogen fuel station is only the second in the nation, but it's vital for automakers that one day want the general public to drive these cars.
DAVE BARTHMUSS, GENERAL MOTORS: No one's going to buy a vehicle like this until they have the confidence that they need that they can get to a pump and refuel and not get stuck.
LAWRENCE: So far, only a few hundred are on the road. Most are loaned out to companies and government agencies to build acceptance. But this summer, Honda will actually lease one for $600 a month with the automaker subsidizing most of the cost. Jamie Lee Curtis will be one of the first to get the Honda Clarity. And actress Joely Fisher is already driving a hydrogen fueled BMW.
JOE ROMM, CLIMATEPROGRESS.ORG: Celebrities, like my 16-month-old daughter, are attracted to shiny new objects guess.
LAWRENCE: Joe Romm is a former Energy Department official. He says hydrogen cars have about half the range of a hybrid and it costs several hundred thousands to build one. So why are so many automakers getting into the fuel cell business?
ROMM: I think, perhaps, the biggest reason is that the Bush administration is still spending about $300 million a year promoting hydrogen and companies want to get a piece of that money and they like the good publicity they get.
LAWRENCE: Critics say emissions are produced during the creation of the fuel. But these cars generate no tail pipe emissions other than water vapor. Right now the price of fuel is a wash. Hydrogen costs twice the price of gas, but it's also twice as efficient.
Ultimately, everyone believes that it's going to take multiple automakers and fuel companies, like Mobil and Chevron, working at the same time to really make this a viable alternative.
Chris Lawrence, CNN, Los Angeles.
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VELSHI: All right, coming up, the way you drive, not just what you drive, could dictate how much money you spend at the pump. We'll show you how to get the most of your mile coming up next on this special edition of ISSUE #1.
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VELSHI: Well, Toyota is promising relief from soaring gas prices. Japan's top automaker says it'll come out with a plug-in hybrid car by 2010. You'll be able to recharge the car from a home electrical outlet. It will be equipped with a next generation lithium ion battery, which is more powerful and smaller than the nickel metal hydride (ph) batteries that are now used in hybrids. General Motors is also joining the plug-in electric car parade with plans to introduce its version, the Coverlet Volt, in 2010.
WILLIS: Love that. Exciting.
Well, one of your biggest concerns this summer I know is saving money on gas. Whether it's driving to work or getting your family away for the weekend, every gallon, every penny counts now more than ever.
I stopped by "Consumer Reports" in Yonkers to get some tips from auto's managing editor Jon Linkov.
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WILLIS: Hey, Jon, let's start with your tip on using GPS to help you map the best route to save gas.
JON LINKOV, MANAGING EDITOR, "CONSUMER REPORTS": Well, definitely, Gerri. What you want to do is plan out your route in advance so that you know where you're going, you don't have any sudden surprises while you're on your trip, and you can also use ratings that we have on consumerreports.org to see which ones will show you gas stations along the way.
WILLIS: Oh, I love that. OK.
Slow down, you say, don't drive like a maniac. LINKOV: Definitely. Every time you go 10 miles an hour faster than 55, so 55 to 65 and 65 to 75, you're wasting five miles per gallon overall.
WILLIS: So that's the easy way to save gas is simply to slow down.
Let's talking about driving smoothly. You say no abrupt stops. You know, accelerate smoothly, as well, correct?
LINKOV: Definitely. You want to be easy on the throttle and easy on the gas. You use momentum, basically. So what you do is, you're easy on the gas when you're starting up. Don't have a jack rabbit start. And the same thing with the braking. Don't slam on the brake at the end.
WILLIS: All right. So you say if you're not actually running the car, shut off the engine.
LINKOV: Right. At 30 seconds or so, you're getting zero miles per gallon. So when you get that 30 second threshold or so, particularly if it's a lot of construction, bumper to bumper traffic, a bridge opening, for example, turn the car off, let it just be off with the windows open because, again, you're getting zero miles per gallon when you're idle at stop.
WILLIS: Now you have some great ideas for outside the car as well. So let's show some folks what you do once you get outside the car. Now they are saving back here as well, correct?
LINKOV: Definitely. First of all, you want to just take stuff off of the roof. Get rid of that big pod because that can hurt fuel economy between one to six miles per gallon, particularly on cars. So you take that stuff off, bring it down and put it in the vehicle. Also . . .
WILLIS: One to six miles per gallon. (INAUDIBLE) 10 miles per gallon.
LINKOV: One to six miles per gallon. Oh, yes, five here, 10 there. It's definitely savings. As well as, take the bike rack off the car. Even the little deflector, that doesn't help. Use a back rack that sort of like mounts on the hatch or on the trunk of a car. And that'll take the bike off of the back, the vehicle's already blocking it, so you're not getting additional wind resistance.
WILLIS: So it's all about aerodynamics and making sure that you are completely wind resistant.
LINKOV: Very much so.
WILLIS: All right. Anything else I can do with the exterior of the car here that's going to make me, you know, spend less money on gas?
LINKOV: Really what you want to do is take off as much of the un-aerodynamic features as possible. Take that stuff off the roof. For an SUV as well. You're putting so much stuff up high, it raises the center of gravity. So take it, put it inside the vehicle, load it as far forward as possible.
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VELSHI: Well, coming up, you can get 50 miles a gallon on your car, you just have to know the secret. And guess what? We have the secrets. Grab a pen and paper. You've got to see this one. It's coming up next.
You're watching ISSUE #1 right here on CNN.
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VELSHI: All right. With what you're paying for gas, you want to get the most out of your tank. But there are some folks out there who are taking this concept to a whole new level. It's called hypermiling. And
CNN's own hyper Miles O'Brien has the story.
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MILES O'BRIEN, CNN CHIEF ENVIRONMENT & TECHNOLOGY CORRESPONDENT, (voice-over): Wayne Gerdes may look like he's out of gas, but actually he's just kind of hyper about saving every drop he can. And I mean hyper.
WAYNE GERDES, HYPERMILER: We're in neutral, so I'm ready to just pop, it starts, we're going.
O'BRIEN: Wait, you just went. That was like immediately into drive.
GERDES: Right. There's no point in wasting any fuel.
O'BRIEN: Wayne is the reigning king of the gas mileage misers known as hypermilers. A ride with him is a real eye-opener. Not to mention a feeling loosener.
GERDES: OK. Hold on to your camera. We're going to take it hard.
O'BRIEN: Yes, I'm going to hold on. I'm going to hold on.
That's what happens when you take a turn without touching the brake pedal. Wayne avoids it like, well, gas stations. He routinely gets 50 miles per gallon in his plain old Accord, twice what Honda promises.
GERDES: And I'm already going to shut it down. This is an advanced technique.
O'BRIEN: He kills the engine whenever he can. Never tailgates, but does draft behind big trucks. He always drives the speed limit and plans trips as if they were the D-Day invasion.
So it forces you to think entirely differently about how you drive.
GERDES: Yes, I'm thinking that like three lights ahead in you're in a suburban traffic area and now I'm going to use the color (ph) red (ph) drive (ph).
O'BRIEN: In Wayne's world, angry tailgaters are proctologists.
GERDES: Guys that are riding your butt.
O'BRIEN: And when they pass him in a huff . ..
GERDES: They're the mad rabbits.
O'BRIEN: And big SUVs are FSPs, as in . . .
GERDES: Fuel sucking pigs.
O'BRIEN: I almost didn't have the heart to tell him about my Yukon XL. But when he came to New York the other day, he held his nose, plugged in a gadget that displays fuel economy and we were off like a herd of turtles for hypermiling 101.
GERDES: Gentle. Easy. Back off a little bit. No sense in racing. Shift to first. OK, we're going slow enough to first. I want your foot on the brake and I want you to shut off the car at 1,100 RPM. And you're working your butt off right now.
O'BRIEN: It's hard work. It is.
Using his techniques, I instantly curtailed my FSP's thirst for unleaded by 30 percent, but still a long way from 50 miles a gallon.
GERDES: This vehicle just isn't meant for downtown.
O'BRIEN: You think?
GERDES: So I have to watch my own speed on this.
O'BRIEN: Wayne started doing this after 9/11. Made him reconsider our dependency on foreign oil. He runs a web site with tips. And with gas where it is now, he has a growing, all be it slow moving, following. He sure made me a believer.
O'BRIEN: OK, call me hyper Miles.
In fact you might say I'm pushing the concept.
GERDES: OK, that should do it.
O'BRIEN: Hyper Miles O'Brien, CNN Wadsworth, Illinois.
(END VIDEOTAPE) VELSHI: Well, it's creative. There are a few things on there that apparently have some police departments a little concerned, like the not stopping at the intersections.
WILLIS: You've got to stop at the stop sign, even though you're saving gas. And that's impressive, 50 miles per gallon.
VELSHI: Double the mileage. Yes, that is impressive.
WILLIS: Come on, you've got to love that.
VELSHI: A lot of work involved in that.
WILLIS: You know, though, I hate being that slow. I don't like to be -- I've got to get there.
VELSHI: But if you are stuck with the car that you can't get rid of right now or you don't want to get rid of but you need to -- you've just got to save that money. And I just filled up. And if I paid $80 to fill up my truck. So these little tips, like taking stuff off the top that you recommended, and maybe employing some of the concepts involved here, less stopping and starting, you know, if you take some of them, it could help you.
WILLIS: Well, for more ideas, strategies, and tips to save you money and protect your house, watch "Open House" every Saturday at 9:30 a.m. Eastern right here on CNN.
VELSHI: And for more on how the news of the week affects your wallet, tune in "Your Money" Saturday's at 1:00 p.m. Eastern and Sunday's at 3:00 right here on CNN.
WILLIS: The economy is issue #1 and we here at CNN, we are committed to covering it for you. Complete coverage of your house, your debt, your savings, your job.
VELSHI: Every weekday at noon Eastern, 9:00 Pacific, right here on CNN. Thanks so much for joining us.
